HR: What Does It Take To Be A Strategic Partner?

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1 2003 Center for Effective Organizations, University of Southern California HR: What Does It Take To Be A Strategic Partner? HR Metrics & Analytics Network Conference December 11-12, 2003 Edward E. Lawler III Center for Effective Organizations Marshall School of Business University of Southern California

2 2003 Center for Effective Organizations, University of Southern California EL86N(1) HR As a Business With 3 Product Lines I. Basic Administrative Services and Transactions involved with compensating, hiring, training and staffing --- Emphasis on resource efficiency and service quality II. Business Partner Services involved with developing effective systems and helping implement business plans and change management --- Emphasis on knowing the business and exercising influence--solving problems, designing effective systems to ensure needed competencies, innovating, intervening and influencing. III. Strategic Partner Role contributing to business strategy based on considerations of human capital, and building the Talent Pool and HR practices as strategic differentiators --- Emphasis on deep and broad knowledge of HR and of the Business, Competition and Market, and executive influence skills

3 2003 Center for Effective Organizations, University of Southern California EL86N(2) HR As a Business With 3 Product Lines The HR function needs to be designed to house all three of these product lines Key Issue: What to outsource and what competencies and tasks should be in-house Key Issue: What role should technology play in each product line

4 2003 Center for Effective Organizations, University of Southern California EL65M Traditional HR HR Best or Traditional Practices HR Services

5 2003 Center for Effective Organizations, University of Southern California EL66M Strategic HR Business Strategy Design HR Practices HR Services

6 2003 Center for Effective Organizations, University of Southern California EL67M Business Partner Business Strategy HR Practices Org. Design Change Management HR Services Execution Implement Change

7 2003 Center for Effective Organizations, University of Southern California EL68M Strategic Partner Human Capital and Business Data Business Strategy HR Practices Org. Design Change Management

8 2003 Center for Effective Organizations, University of Southern California EL5J Percentage of Corporate Officers Who Strongly Agree 78 HR should be a partner to me in my efforts to build a stronger executive talent pool 27 Believe this philosophy Think HR plays this role now Source: McKinsey War for Talent Corporate officers survey

9 2003 Center for Effective Organizations, University of Southern California EL3I Percentage Reporting that HR is Business Partner HR Managers Line Managers All Industries Manufacturing Engineering/Design Services Insurance/Finance/Real Estate Health Services Government Based on SHRM/CCH Survey 1998

10 2003 Center for Effective Organizations, University of Southern California EL4N Role of HR as Seen by Senior Executives (number of HR Respondents = 1280) Employee Relations Focused Policy Administrator Program Coordinator Reactive Problem Solver Strategic Partner Other In percents Source: SHRM / BSCol Aligning HR with Organization Strategy Survey

11 CFO s Believe HR Cost Center or Strategic % responding Mainly as a cost center Somewhat more as a cost center 50/50 Somewhat more as a strategic partner Mainly as a strategic partner Source: CFO Research Services 2003 Center for Effective Organizations, University of Southern California EL31N

12 2003 Center for Effective Organizations, University of Southern California Human Resource Roles Current Maintaining Records Collect, track and maintain data on employees Auditing/Controlling Insure compliance to internal operations, regulations, legal, and union requirements HR Service Provider Assist with implementation and administration of HR practices Practice Development Develop new HR systems and practices Strategic Business Partner Member of the management team. Involved with strategic HR planning, organization design, and strategic change

13 2003 Center for Effective Organizations, University of Southern California HR and Business Strategy No Role in Business Strategy % 3.4% Implemented Business Strategy % 11.6% Input and Helped Implement Business Strategy % 43.8% Full Partner in Development and Implementation % 41.1%

14 Know Return on HR Investments % of CFO s responding To a great extent To a considerable extent To a moderate extent To a minimal extent Not at all Source: CFO Research Services 2003 Center for Effective Organizations, University of Southern California EL29N

15 2003 Center for Effective Organizations, University of Southern California Effectiveness and Time Spent CORRELATIONS Records Audit/Controlling Services HR System Development Partnering

16 2003 Center for Effective Organizations, University of Southern California SM10N RELATIONSHIP OF HR ORGANIZATION TO HR EFFECTIVENESS OUTSOURCING Transactional work is outsourced Areas of HR expertise are outsourced HR SERVICE TEAMS HR teams provide service and support the business Corporate centers of excellence HR systems and policies developed through joint line/hr task teams DECENTRALIZATION Decentralized HR generalists support business units Very small corporate staff most HR managers and professionals are out in businesses HR practices vary across business units Zero order correlation: * p 0.05 ** p 0.01 *** p HR EFFECTIVENESS.26*.31**.12.35***.12.36***.28**

17 2003 Center for Effective Organizations, University of Southern California SM10N(2) RELATIONSHIP OF HR ORGANIZATION TO HR EFFECTIVENESS (CONT.) RESOURCE EFFICIENCY Administrative processing is centralized Self-funding requirements exist for HR services Some activities that used to be done by HR are now done by line managers Some transactional activities that used to be done by HR are done by employees on a self-service basis ROTATION People rotate within HR People rotate into HR People rotate out of HR to other functions Zero order correlation: * p 0.05 ** p 0.01 *** p HR EFFECTIVENESS.43***.36***.24*.30**.37***.31**.42***.13.16

18 2003 Center for Effective Organizations, University of Southern California EL108N Use of Various HR Organizational Approaches Strategy No Role Implementation Role Input Role Full Partner OUTSOURCING TEAMS *** DECENTRALIZATION RESOURCE EFFICIENCY * ROTATION ** Means; Response scale: 1 = Little or no extent; 2 = Some extent; 3 = Moderate extent; 4 = Great extent; 5 = Very great extent Analysis of variance among roles: * p 0.05 ** p 0.01 *** p 0.001

19 2003 Center for Effective Organizations, University of Southern California Effectiveness and Activity Increase CORRELATIONS Design & Organizational Development Employee Care Employee & Management Development Recruitment & Selection Compensation HR Information Systems Performance Appraisal Career Planning Union Relations

20 Activity Changes over the Past 5-7 Years 2003 Center for Effective Organizations, University of Southern California EL110N DESIGNING & PLANNING ORGANIZATIONAL DEVELOPMENT No Role 3.0 Strategy Implementation Role 3.6 Input Role 3.7 Full Partner 4.1*** COMPENSATION & BENEFITS LEGAL & REGULATORY EMPLOYEE DEVELOPMENT * RECRUITMENT & SELECTION HR INFORMATION SYSTEMS UNION RELATIONS Scale response: 1 = Greatly decreased; 3 = Stayed the same; 5 = Greatly increased Analysis of variance among roles: * p 0.05 ** p 0.01 *** p 0.001

21 2003 Center for Effective Organizations, University of Southern California EL30M Relationship of Information Technology Use to Performance MEAN PERFORMANCE RATING Completely Integrated HR Information Technology System 6.6 Most Processes are Information Technology Based but Not Fully Integrated 6.5 Some HR Processes are Information Technology Based 6.0 Little Information Technology Present in HR Function 4.6 No Information Technology Present 5.6 Scale response: 1 = Not Meeting Needs, 10 = All Needs Met

22 2003 Center for Effective Organizations, University of Southern California EL109N State of HR Information Systems Completely Integrated HR Information System (7.6% of companies) Most Processes Are Automated but Not Fully Integrated (35.9% of companies) Some HR Processes Are Automated (48.3% of companies) Little Automation Present in HR Function (6.9% of companies) No Role STRATEGY PERCENT RESPONDING Implementation Role Input Role Full Partner No Automation Present (1.4% of companies)

23 2003 Center for Effective Organizations, University of Southern California EL13H Front/Back Human Resources Structure Human Resources Vice President Vice President s L.O.B. Centers of Excellence Transaction Centers Vendors Generalist Generalist Generalist

24 2003 Center for Effective Organizations, University of Southern California EL12H Business Partner Vice President Human Resources Centers of Excellence Rewards Staffing Training & Development Communications HR Generalists Service Centers Information Technology Claims Processing Employee Assistance

25 2003 Center for Effective Organizations, University of Southern California EL46L Old Future Strategy Advice New Strategy Service Strategy IT Self-Service Advice IT Self- Service Service Out Source Shared Services

26 2003 Center for Effective Organizations, University of Southern California SM14N Information Technology and Human Resource Management Strategic Partner Role Data Analysis, Modeling and Simulation Capabilities Business Strategy Input HR Strategy Formulation Strategy Implementation Change Management Organization Design Upgrading Analytic Capabilities Business Support and Execution Role HR System Administration Employee and Manager Tools, Information and Advice Data and Analysis Tools HR System Development, Learning and Improvement Consultation Talent Strategy and Processes Program and System Upgrades Personnel Services Role Transactional Self-Service Processes Help-Line Services Program and System Upgrades Shaded = IT/HR Enabled

27 Vision of Net-Enabled HR Individual portals containing all of the key information needed to enhance productivity and satisfaction Real-time business information Knowledge management links to specialized expertise and communities of practice Reinvented and personally tailored HR processes Prompts triggered by life stage events Cisco s travel reimbursement Trilogy s reward choices Real-time elearning Two-way employee communication Productivity enhancing tools for managers and workers 2003 Center for Effective Organizations, University of Southern California DF50L

28 2003 Center for Effective Organizations, University of Southern California DF13L The Employee Portal: Future Vision Screened Categorized Prioritized Project monitoring Balanced scorecard HR-life stages Key event updates 2-way communication Push from internal job site Competitor intelligence Industry information Functional Knowledge Company info External info Favorite sites Home link Personal Info Work Area Site info Weather Traffic Productivity tools Shared databases Management tools J-I-T e-learning Knowledge networks Best practices Lessons learned

29 Vision of Net-Enabled HR Intranet becomes the focus for strategically managing all aspects of the firm-employee relationship HR links key processes Linking competencies used for recruiting, skill development, promotions Combines HR data with business data e.g. relating employee commitment to customer satisfaction, productivity, turnover rates 2003 Center for Effective Organizations, University of Southern California DF51L

30 2003 Center for Effective Organizations, University of Southern California SM14N Information Technology and Human Resource Management Strategic Partner Role Data Analysis, Modeling and Simulation Capabilities Business Strategy Input HR Strategy Formulation Strategy Implementation Change Management Organization Design Upgrading Analytic Capabilities Business Support and Execution Role HR System Administration Employee and Manager Tools, Information and Advice Data and Analysis Tools HR System Development, Learning and Improvement Consultation Talent Strategy and Processes Program and System Upgrades Personnel Services Role Transactional Self-Service Processes Help-Line Services Program and System Upgrades Shaded = IT/HR Enabled

31 2003 Center for Effective Organizations, University of Southern California EL1D Sources of Competitive Advantage Natural Resources Economic/Financial Location/Market Access Technology Human Assets Organizational Capabilities Core Competencies

32 2003 Center for Effective Organizations, University of Southern California EL1E Strategy Competencies Capabilities People Fit Structure Rewards Process

33 2003 Center for Effective Organizations, University of Southern California EL14H Core Competencies Focus: technical and production skills needed to develop and make the firm s products Example: miniaturization, precision manufacturing, imaging, digital signal processing Organizational Capabilities Focus: organizational designs and management practices that enable strategic performance Example: customer focus, speed to market, quality

34 2003 Center for Effective Organizations, University of Southern California EL2E Organizational Capabilities Quality Focus Speed Innovation Customer Focus Stateless/Global Partnering Change Management Knowledge Management Growth Cost Control Leadership Human Capital Management

35 Virtuous Spiral 2003 Center for Effective Organizations, University of Southern California EL16M

36 2003 Center for Effective Organizations, University of Southern California EL6M Virtuous Spiral Key Points Requires contribution of integrated practices Must contribute to performance and member well being Requires continuous assessment and frequent change Beware of arrogance, complacency, greed, false spirals and fraudulent spirals

37 2003 Center for Effective Organizations, University of Southern California EL83N Types of Metrics and Examples Measuring the Function Effectiveness: Speed, productivity, quality Satisfaction: Are HR employees satisfied? Are customers satisfied? Volume: Number of training hours (against target), Number of employees utilizing career resources Cost: Operating costs of the function; HR costs per employee Return on Investment: Cost benefit of implementing new HR systems Mohrman, 2003.

38 2003 Center for Effective Organizations, University of Southern California EL82N Types of Metrics and Examples Strategic Human Capital Management Talent Management: (shared with line) Hiring of targeted skills compared to plan Retention of key skills/targeted key employees Aligned development plans implemented Talent Deployment: Percentage of employees with growth and broadening assignments Percentage of employees with 5 or more years in same job Time to full contribution in new positions Mohrman, 2003.

39 2003 Center for Effective Organizations, University of Southern California EL81N Types of Metrics and Examples Business Impact Impact of HR Systems on the business: Impact of training and development on business performance HR process and system improvement outcomes: Impact on resources, speed, line customers, ease of doing business Productivity/Revenues per employee (shared with line) Speed of implementation of organizational change: time to achieve intended performance gains (shared with line) Mohrman, 2003.

40 2003 Center for Effective Organizations, University of Southern California EL84N Key Analytic Issues Talent Fit with Capabilities and Competences HR Systems Fit with Strategy Strategy Execution Change Management Strategies and Execution Value of HR Practices, Knowledge Management Practices

41 2003 Center for Effective Organizations, University of Southern California EL50L New HR - Deliverables Business Strategy Organizational Capabilities Core Competencies Intangibles HR Services

42 2003 Center for Effective Organizations, University of Southern California EL99N HR s New Capability Requirements To deliver the strategic organizational effectiveness vision HR will need to develop a new set of capabilities: Enhanced understanding of the business strategy and processes ERM and branding: internal and external Data mining and financial analysis Information technology fluency Building and managing effective strategic supplier relationships Knowledge management

43 2003 Center for Effective Organizations, University of Southern California SM11N Possible Explanations for Slow Change in Human Resources Organization Inherent Logic of HR Services A Basic Level of Service that is Not Optional Co-dependency Between Line and HR Skills Gap / Lack of Line Management Confidence Preoccupation with War for Talent / Focus on Traditional Tasks Failure to Accurately Define the Value-Add of HR Slow to Align the Organization / Internal Change Leadership Weak Slow to Take Advantage of ehr and Outsourcing

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