HR Strategy 2.0 July 2016

HR STRATEGY 2.0: PROVING YOU ARE IN ALIGNMENT WITH BUSINESS STRATEGY

BY DARRIN COON, SPHR, CEBSCoon HR Consulting

HR STRATEGY 2.0

•Disclaimer:

• This presentation has been prepared for the purpose of illustrating basic concepts, practices, and principles thought to be useful in human resource management. The author reserves the right to use examples that are general in nature so as to avoid the disclosure of any private, proprietary, or contractual information. No legal advice is being given.

HR STRATEGY 2.0

• Three criteria guide my presentations:

• Listened to others…• Read what others have written…• Own experiences including the hard kind!

HR STRATEGY 2.0

• The transformation of HR to greater strategic focus is on the rise, but some seem to be struggling with the change.

• The direct “cost of people” is often among the largest expense in an organization.

• If you consider “productivity from people,” then the upside potential is remarkable.

HR STRATEGY 2.0

• Society for Human Resource Management:

• “Makes the business case for HR management (e.g. Return on Investment ROI ) as it relates to efficient and effective organizational functioning.”

• Source: SHRM Competency Model, #9, Business Acumen Behaviors

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• Can you state your business strategy in one sentence?

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•Who can provide an example of a strategic HR contribution?

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• “99 percent of the people in HR feel, believe, and think they are being strategic, but only 1 percent of the people in HR know they are strategic…”

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• “What is missing ?

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• “…the hard evidence and credible proof of their strategic impact.”

• Source: Dr. John Sullivan, HR Leader and Consultant to Fortune 500 Companies

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• A few goals for the next hour:

• Introduce the strategic HR mindset• Equip you with some basic tools • Identify the four basic steps to becoming strategic• Illustrate the concepts via case study• Suggest areas you might review

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• The concept of being “strategic”:

• Creating operational advantage

• Securing new value from intentional change

• Focus on results rather than reports and processes

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• What can HR impact ?

• Productivity – More output at same or lower costs• Teamwork – Training / coaching talent / alignment• Quality – Continuous improvement (e.g. Lean HR Movement)

• Adopted from: Employee Engagement Does More than Boost Productivity, by John Baldoni, Harvard Business Review, July 4, 2013.

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• What can HR impact ?

• Talent - Identify, recruit, and retain high performers• Culture – Promote the way things get done• Brand – Align resources to create desired market identity

• Adopted from: Employee Engagement Does More than Boost Productivity, by John Baldoni, Harvard Business Review, July 4, 2013.

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• Are you working in a silo ?

• Get out !!! • Do you know what drives success in your business? • Position yourself as an internal consultant• Become a “cultural traveler,” learn the sub-cultures

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• The HR Continuum: What is your mix?

• Transactional: Onboarding new hires, routine reporting• Functional: Compensation, creating and maintaining policies • Productivity Improvement: Securing talent, finding efficiencies • Competitive Advantage: First mover, best value, branding • Transformative: Turnarounds, innovation, and market expansion

HR STRATEGY 2.0

• It’s not always the big plans. What will bring the greatest impact?

• Transactional: Onboarding new hires, routine reporting• Functional: Compensation, creating and maintaining policies • Productivity Improvement: Securing talent, finding efficiencies • Competitive Advantage: First mover, best value, branding • Transformative: Turnarounds, innovation, and market expansion

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• Searching for strategic value:

• Think:• Opportunity (or problem)• Action• Result

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• How do we measure our value-added contributions in relation to what they cost?

• Benefits to costs (B/C)• Return on Investment (ROI)• Opportunity Cost• Cost of doing nothing

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• Benefits to Costs:

• Train sales force

• Cost of training $25,000

• Sales jump by $75,000

• Benefits to Costs: $75,000 / $25,000 = $3.00 to $1.00

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• Return on Investment (ROI):

• Benefits Minus Costs: $75,000 - $25,000 = $50,000 (net)

• ROI: $50,000 / $25,000 = 2 x 100 = 200%

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• Opportunity Costs:

• In the face of limited resources…

• Opportunity cost is the value of the next best alternative.

• Q: Why should leadership support your proposal?

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• The cost of doing nothing:

• Complacency is the most overlooked “cost”.

• Do not accept the status quo.

• You may be at risk of becoming a “cost center”.

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• What is the most powerful tool for discovering opportunities to add value?

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• Listening…in all its variations:

• Serving on cross functional teams• Data mining• Becoming accessible• In the minds of others, you don’t understand until they are convinced

you understand.

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•Pursue things of value:

•Be a good steward• Serve others•Value people• Proposals consistent with company values

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•Who ?

•Customers• Front line managers• Production staff• Sales and customer service representatives•Listen all the way up, down, and out

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• Reality check:

• If you are not getting better, then you are falling behind.

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A word about taking risks:

• “…the leader must be comfortable with the prospect of making a decision that ultimately turns out wrong.”

• Source: Patrick Lencioni, The Five Dysfunctions of a Team

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• “Help, I have no budget, time or support.”

• Do you know your critical success factors? • Are your efforts aligned with your organization?• Are you implementing too many systems?

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• “Help, I have no budget, time or support.”

• Trying to cope with too much detail?• Have you cut positions and yet increased the workload? • Have you benchmarked your work against best practices?

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• Finding the capacity to invest strategically:

• Purge systems and processes of anything of little value.• Build the right team: everyone focused on improvement.• Practice lean HR: eliminate what distracts from goals.• Manage to reality rather than “a plan”: feedback informs next steps

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• Finding capacity to invest strategically:

• Help others reduce waste: standardize where appropriate. • Ensure that you have credible, meaningful measurements. • Don’t try to avoid all risks, but take the right risks.

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What is your risk posture?

• Accept: Impact low enough that no action is required.• Prevent: The risk is a real concern, needs immediate action.• Mitigate: Impractical to eliminate, but take steps to mitigate. • Embrace: The risk is worth much more than the expense.• Transform: Proactively re-work to gain competitive advantage.

• Adopted from: Transformative HR, How Great Companies Use Evidence-Based Change for Sustainable Advantage, by Boudreau and Jesuthansan (Towers Watson.)

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Take action with a problem solving mindset:

• “Problems are just obstacles to goals.”

• Source: Dr. Henry Cloud, Executive Coach

HR STRATEGY 2.0

Take action with a problem solving mindset:

• Be a problem engager, not a problem avoider.• Goal is to have better problems, not no problems.• Avoid the all or nothing thinking; stay flexible.• Hard problems - just lots of knotty little problems.• Distinguish: driving behaviors vs. outcome

measures

HR STRATEGY 2.0

• The Four Basic Steps:

1. Learn to communicate in business terms.2. Identify initiatives that further business objectives.3. Leverage the contributions of your talent.4. Document and report on the results.

HR STRATEGY 2.0

1. Learn to communicate in business terms

• Use quantitative terms• Think: “cause and effect” or “drivers and outcomes”• Translate concepts into dollars• Keep it realistic and measurable

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2. Identify initiatives that further business objectives:

• Furthers strategic goals / felt beyond HR• Grows revenues / reduces costs• Improves customer experience• Saves time without needing new resources• Reduces errors / improves quality • Promotes employee engagement / improves productivity• Easily understood / repeatable

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3. Leverage the contributions of your talent:

• Buy-in from leadership• Secure time, budget, skill sets• Educate others on the “why”• Think win-win, all on the same team• Don’t confuse inaction with savings

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4. Document and report on the results:

• Be accountable…timely…recognize team members

• Review outcome from three perspectives: • Actual results• If had done nothing • How to do it better next time

• Good, credible analysis, but not a dissertation

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Case Study:

• Cost of health plan rapidly increasing• Cost-shifting a common response• Health plan viewed as unsustainable benefit

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• Transforming the problem into an opportunity:

• Remember to think: “opportunity, action, result.”

• Try turning the question on it’s head.

• How can you drive up the cost of health insurance?

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• What drives the cost of health insurance ?

• Don’t get lost in all the complexity.

• Price per unit x number of units consumed = cost

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• Known: Providers do not charge the same for like services.

• Hard for everyday consumers to shop healthcare.

• Introduce a consumer friendly price transparency tool.

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• Offer an incentive (premium differential) for wellness

• Educate participants on the “why”

• Think win-win: Good for both participants and the employer

• Source: 2010 World Economic Forum. Shows that 8 behaviors drive illnesses that account for 80% of healthcare costs.

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• Logic tree:

• Lower cost of healthcare => reduce consumption• Reduce consumption => identify & manage risks early• Identify & manage risks early => wellness participation• Wellness participation => behavior change

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• Logic tree (continued):

• Behavior change => financial incentive and education• Financial incentive and education => user friendly tools• User friendly tools => broker/consultant/TPA• Broker/consultant/TPA => Go to market

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• How do you know if the actions are working?

• Pilot test and compare to those not participating

• Before and after customer feedback surveys

• Chart trend lines and seek feedback from participants

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• Outcomes:

• Consumer transparency tool returned more than $5 to $1• Wellness participation increased from 43% to 95%• No healthcare premium increases five years in a row • Plan costs running 30% below market• ROI: 400%

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• With a team effort:

• A growing cost center was transformed into a strategic advantage!

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• If had done nothing:

• Employees would be paying market rates

• Value of total compensation compromised

• Reduced capacity to attract and retain talent

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• Ideas for next time:

• Promote greater use of price transparency tool • Pilot test health coaching• Incentivize drug utilization reviews• Improve access to education

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• More on where to look:

• Performance management: Who is leaving? Staying? • Turnover: Costs of recruiting, onboarding, and training• Hiring: Decisions tied to known performance metrics? • Risk Management: Patterns of penalties, fines, and settlements

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• More on where to look:

• Safety programs: Accident rates and impact on work comp • Diversity: Inclusion rates, career development, innovation • Harassment prevention: Proactive rather than reactive culture• Succession planning: Transfer of intellectual capital

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• More on where to look:

• Supervisor training: Link to customer experience• On-boarding: Productivity, retention, cultural integration• Total compensation: Recruitment, performance incentives • Flexible work options: Cost savings, retention, job satisfaction

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• Concluding thought:

• “The HR leader of tomorrow will think like the architect who designs innovative solutions that actually work."

• Darrin Coon, Darrin.e.coon@gmail.com; 479-220-8097